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EUR Shorts Crucified, And The Fun Is Not Done Yet As Specs Expect Food Price Surge To Persist, Further Curve Steepening

Tyler Durden's picture




 

Last Friday, following the disclosure that net commercial EUR short positions has surged to -45,182, nearly a double from the -24,201 the week before, we expected a massive short covering squeeze, which would bring the EURUSD far higher. Today, the CFTC released its weekly update of non-commercial futures exposure. As expected, the covering rally was fierce and intense, and is likely still ongoing: net non-speculative long positions surged by 49,291, in line with the highest one week move in recent years, the biggest of which was recorded in June 2010 when net shorts collapsed by 49,585. The net result pushed net spec positions from -45,182 to 4,109, and resulted in a move in the EURUSD from 1.33 last Friday to 1.3621 at last check. We believe the short covering rally is now over. This is further corroborated by the drop in USD longs in the past week from 10,057 to 5,210. Other currencies were not surprisingly quiet in the past week, with little notable action in either CHF, GBP or JPY net spec exposure.

Elsewhere, in the crop space, futures continued the grind higher in all categories, as speculators continue to expect the food price surge to not moderate any time soon.

And lastly, the third category we keep track of, bonds, saw a dramatic surge in expectations for a plunge in short-term yields, as net non-specs jumped from -30k to +10.9k, and 5 Year net exposure jumped to a two year high at 175k contracts. The most hated part on the curve is still the 10 Year, which had a -86.6K contracts. We expect the big boys to take this info and cause a squeeze in the 10 Year, while forcing an unwind to the left side of the belly, resulting in a material flattening of the 2s10s.

 

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Fri, 01/21/2011 - 17:47 | 894603 Id fight Gandhi
Id fight Gandhi's picture

It would be nice to have a stable currency. What's the deal with gold going down and the dollar going down? Stocks of course up.

Fri, 01/21/2011 - 18:04 | 894648 flacon
flacon's picture

"Gold" is not traded anywhere in this financial system. "Paper" 'gold' is traded - but that's not real gold. 

Fri, 01/21/2011 - 19:30 | 894805 El Hosel
El Hosel's picture

"What's the deal with gold going down and the dollar going down? Stocks of course up."

 IWM and NDX appear to be a failing here along with gold, gold stocks and copper. ( not to mention AAPL,GOOG,and AMZN noticably weak on very strong volume today )

http://finviz.com/futures_charts.ashx?t=DX&p=w1

The dollar has not really gone anywhere, mostly sideways since 2008... If anything all of the above may be anticipating a Dollar rally?

 

Fri, 01/21/2011 - 17:49 | 894608 pazmaker
pazmaker's picture

Will the EUR continue it's climb next week?  I don't think so... it has to come down.

Fri, 01/21/2011 - 18:59 | 894760 something fishy
something fishy's picture

No sign of a coming downturn yet....

Fri, 01/21/2011 - 20:22 | 894884 Id fight Gandhi
Id fight Gandhi's picture

Eur comes down is better for exports and will help their economy grow an pay off debt.

But a weak euro adds to the debt crisis so they prop it up.

A stable euro near dollar parity would give the Germans a huge advantage in trade.

How do they win?

Fri, 01/21/2011 - 17:53 | 894622 RAMADANGONIM
RAMADANGONIM's picture

EUR come down

Fri, 01/21/2011 - 17:57 | 894629 JW n FL
JW n FL's picture

Fight the FED Bitchez and your shorts will get "blow torched?"

Fri, 01/21/2011 - 17:57 | 894631 JW n FL
JW n FL's picture

being net short, you are only hurting yourself!

Fri, 01/21/2011 - 18:02 | 894646 Cheesy Bastard
Cheesy Bastard's picture

I don't know, I find net shorts rather freeing.

Fri, 01/21/2011 - 18:11 | 894662 Dr. Porkchop
Dr. Porkchop's picture

Just don't log on to the net.

Fri, 01/21/2011 - 18:18 | 894677 Cheesy Bastard
Cheesy Bastard's picture

iPood.  Vinny with a mop, aisle 7.

Fri, 01/21/2011 - 18:45 | 894736 goldmiddelfinger
goldmiddelfinger's picture

Look at you, a living fart joke.

Fri, 01/21/2011 - 20:37 | 894916 Cheesy Bastard
Cheesy Bastard's picture

That was stupid.  Could you repeat it?

Fri, 01/21/2011 - 18:45 | 894739 goldmiddelfinger
goldmiddelfinger's picture

Look at you, a living fart joke.

Fri, 01/21/2011 - 20:37 | 894917 Cheesy Bastard
Cheesy Bastard's picture

It was a shit joke, retard.

Fri, 01/21/2011 - 17:59 | 894638 gold mining ceo...
gold mining ceos are idiots's picture

New dynamic is the following: specs are going long euro short gold. Uh..that trade will not last.

Fri, 01/21/2011 - 18:26 | 894702 Spitzer
Spitzer's picture

Dennis Gartman was short Euro long Gold hahaha

Sat, 01/22/2011 - 19:22 | 896392 gkm
gkm's picture

I forgot about that.  Thanks for the reminder.  I have no idea how that guy makes any money trading.  It must be from all the subscriptions he sells to those that fade him.

I had also heard someone say that the world is still looking for a new reserve currency and "the Euro has proven that it won't be it."  Makes me think that the Euro has been tracing out a big pennant over the last several years.  

Fri, 01/21/2011 - 18:00 | 894641 Yen Cross
Yen Cross's picture

  Thanks for the charts. Saved me a few clicks. Regarding the eur/usd trade. I hedged my usd/jpy and will wait for the Sunday interbank and fixing in Asia. Nuts!

Fri, 01/21/2011 - 18:02 | 894647 Mike2756
Mike2756's picture

Wheat looks like it has the potential to really explode.

Fri, 01/21/2011 - 22:23 | 895114 Rodent Freikorps
Rodent Freikorps's picture

A danger for grain silos to be aware of, no doubt.

Fri, 01/21/2011 - 18:05 | 894650 plocequ1
plocequ1's picture

If the DXY goes below 60 , I will be no more.

Fri, 01/21/2011 - 18:06 | 894651 AxiosAdv
AxiosAdv's picture

No FXE available for short sale.

Fri, 01/21/2011 - 18:13 | 894663 sbenard
sbenard's picture

More dollar devastation!

At the end of June, corn was priced at $3.53/bushel. Today, it closed at $6.57/bushel at a season of the year when the price is usually decling. It rose today instead.

Then, after the market closed, the EPA ordered a 50% increase in the amount of ethanol in our gasoline. Ethanol already uses about 40% of our corn crop. Guess what will happen to the price of corn when the market opens Sunday evening? Hint: It WON'T go down! Take it from this grain trader. Food inflation is going to become MUCH WORSE!

Fri, 01/21/2011 - 18:27 | 894704 cossack55
cossack55's picture

But we need the shitty gas for our shitty cars so we can hire more shitty mechanics to fix the shit that the shitty gas just screwed up.  Monsanto wins again.  Is it the corn or the genetically modified poison that damages engines?

Fri, 01/21/2011 - 22:25 | 895117 Rodent Freikorps
Rodent Freikorps's picture

I guess it is time to open a garage.

Car mechanics can always put food on the table. Even during a depression.

Fri, 01/21/2011 - 18:45 | 894731 serotonindumptruck
serotonindumptruck's picture

Food inflation is going to become MUCH WORSE!

Would you be willing to hazard an educated guess as to a time horizon on this imminent price inflation? (Tell it to me straight, Doc, how much time do I have left?)

Sat, 01/22/2011 - 10:41 | 895616 Hollow_Point
Hollow_Point's picture

More government madness. Raise the fuel economy requirements, dumb down the fuel, ruin the engines, cause problems for the auto companies so it is harder for them to pay back the money they borrowed from the people, put pressure on corn prices, make it more expensive for farmers to feed their livestock, anf peolpe to consume corn products....all so the fucking cronies can make money selling a fucking fuel that cost more to make than what its worth. Assholes!

Fri, 01/21/2011 - 18:17 | 894675 buzzsaw99
buzzsaw99's picture

Even MUB caught a breeze up her skirt today. Wouldn't want to be 3X long any equity sector over the weekend.

Fri, 01/21/2011 - 18:35 | 894711 Ferg .
Ferg .'s picture

This euro rally is corrective in my view . Wave patterns for EUR/USD , EUR/GBP , and in particular EUR/CAD are very very clear . Textbook ABC corrections . Aside from that there has been little or no fundamental basis for this surge,   which is the result of :

1. Huge short covering

2. Normal corrective price action

3. Asian central bank buying 

 

Take a look at the 15 minute charts . Most of the buying this week occured during the Asian session . There was virtually no follow through from the European open right through N.American trading except for on Friday . However even then the move was sloppy and took place primarily after 12.00 GMT , typically an uneventful period ( on Friday ) in FX .

What this says to me is that unlike last week , when the vicious stop run surge occured during European/N.American trading hours , the rally of the past few days was the result of Asian buying during  periods of low liquidity with pretty much no follow through once the big boys in London , Frankfurt and New York came online . Not indicative of a healthy trend . Fully expect EUR/USD to reverse course somewhere between 1.3700-1.3750 . Confluence of a 61.8% Fibo and horizontal resistance . And as for fundamentals , has anything really changed in the last two weeks ? Not really .

Fri, 01/21/2011 - 19:07 | 894771 Sudden Debt
Fri, 01/21/2011 - 22:27 | 895119 Rodent Freikorps
Rodent Freikorps's picture

When do you think the exodus of whites from Europistan to the USA will begin?

Fri, 01/21/2011 - 20:26 | 894891 scratch_and_sniff
scratch_and_sniff's picture

Shorts collapsed in June2010 by 49,585 and resulted in a 2200 pip tear-up, and they just collapsed by 49,219(366 of a difference form last June) and we get a meagre 300 pip blip...lol, its too funny to take seriously. 1.4250 minimum by July, don’t let anybody tell you bunch of crazy bastards anything different.

Sat, 01/22/2011 - 09:06 | 895564 Tense INDIAN
Tense INDIAN's picture

dollar index down .925%.....broken crucial 78.5 level....i think this will go down just like in late 2007 and early 2008//...sending oil and other commodities skyhigh.....they will only coe down when the dolar ralies....stock are going to come down before that........Indian Makets ahve been forming a huge Expanding ending diagonal......

Sun, 01/23/2011 - 02:02 | 896787 Grand Supercycle
Grand Supercycle's picture

EURUSD choppy daily chart has been bullish recently (hence the rally) but larger time frames are not bullish and ultimately they have more influence.

http://stockmarket618.wordpress.com

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